New Delhi

PrimeMinister Narendra Modi’s recent four-nation tour of Europe, aimed partly at consolidating strategic relations with key European partners amid the changing geopolitical and trading landscape, has a greater significance in terms of diversifying India’s external economic engagement with access to wider markets, according to a new report.

The article by Politeia Research Foundation (PRF) cites the finalisation of the India-EU free trade agreement as a major step forward in the economic partnership.

“By reducing barriers to goods and services, the agreement can help the EU diversify its partnerships and strengthen its presence in one of the world’s fastest-growing markets, while enabling India to expand exports, attract investment, upgrade its industries and integrate more deeply into global value chains,” the PRF article published in India Narrative states. It highlights that in 2024, the EU was India’s second-largest trading partner after China, accounting for 11 per cent of India’s total global trade. Meanwhile, India was the EU’s tenth-largest trading partner, accounting for only 1.7 per cent of the EU’s global trade. This shows that while the EU is a major market for India, the latter remains a relatively smaller, though increasingly relevant, partner for the EU.

The EU-India FTA could, therefore, help address this gap by supporting stronger Indian export growth to the EU and by improving market access for EU firms in India.

With a market of close to 1.5 billion people and an expanding middle class, India offers the EU an important source of export diversification and long-term demand growth. For India, the agreement offers an equally important opportunity. Under the EU-India FTA, the EU has committed to eliminating tariffs on over 90 per cent of tariff lines, covering 91 per cent of the trade value, creating a window for India to drive export growth and increase its share of EU imports.

Overall, the FTA is expected deepen EU penetration in high-value sectors and increase India’s access to advanced technologies and industrial inputs.

The key point is that these provisions reduce the tariff disadvantage faced by Indian exporters in sectors where even small price differences can affect market share, the article points out.